Digital assets are today’s emerging asset class, dominated by a new breed of Gen Z and Millennial investors who may be causing a shift in traditional retail IR practices.
Since 2020, this global group of blockchain investors has diversified their bitcoin and cryptocurrency portfolios to embrace decentralized finance (DeFi). These investors buy, hold, lend and tokenize – central to driving the use cases and business models that make DeFi projects work. Tokens represent a tradable asset or utility that allows the holder to use it for investment or economic purposes. They are built on top of an existing blockchain network, most often Ethereum, and can perform a variety of functions in DeFi mechanisms, such as: B. Governance and voting.
DeFi has introduced new crowdfunding opportunities that allow companies – projects in blockchain parlance – to find buyers and liquidity for their tokens. This is happening through initial distributed exchanges (IDOs) like Uniswap and initial centralized exchanges like Coinbase. Seeking the long-term appreciation that owning an early-stage company’s token could bring, investors are using their token to participate in yield farming – a DeFi practice in which crypto assets are staked or lent out to generate high returns or to earn rewards in the form of additional cryptocurrency.
Explanation of DeFi, tokens and IDOs
DeFi is blockchain-built financial software that can be assembled like Legos of money to create almost any traditional financial service product, such as: a trading exchange, derivative or insurance product. Since its debut in 2020, DeFi has grown to a total value of $180 billion, peaking in November 2021, according to DappRadar.
Blockchain companies conduct crowdfunding sales starting with traditional investor documents like a white paper and pitch deck. The token economic model specifies the quantities of tokens issued, categories, vesting periods, locks, etc. Launchpad partners – much like a broker dealer or investment banker, each with their own community of investors – are the first step in the pre-sale, private sale through public sale phase of the IDO. On the road to public sale, marketing and community building are the top jobs for success.
Retail DeFi investors are Gen Z, loosely defined as 24 and under, and millennial retail investors aged 25-40. They are big users of social media like Twitter and Reddit and communication platforms like Telegram and Discord. They are part of a growing group of investors who see cryptocurrencies as viable replacements for fiat currencies. Gen Z grew up in a time of growing distrust of governments and traditional institutions: they like the anonymity, security, and freedom that cryptocurrencies and blockchain offer.
Investing in digital assets is making many millennials rich. A CNBC survey of millennial millionaires in late 2021 found that more than half (53 percent) have at least 50 percent of their wealth in crypto, and 83 percent of them own cryptocurrencies. This suggests a sea change in how retail investors approach wealth creation compared to the generation before them, who may still be blockchain skeptical.
community house
DeFi investors want to engage with the coins and companies they follow; They want to be part of a movement and a product they love. It’s common for a small blockchain to have up to three community managers, who cover collaborating with communities across countries and time zones, moderate all conversations about communication apps, and establish and maintain the community policies.
The role of the community manager in crypto goes far beyond simply moderating community engagement. It extends to maintaining harmonized communication between the diverse network of investors, users and partners. Community managers have a responsibility to develop robust growth strategies, engage with influencers and ambassadors, create educational content, listen and gather investor feedback, and actively participate in generating returns for the blockchain.
Investor newsletters and traditional news media are old school and even email is a bit passé for these investors. They prefer blogs for news or podcasts. You look at YouTube influencers or ask-me-anything sessions on Telegram. Simple social listening is not enough: More sophisticated AI and tools for sentiment tracking and entity mapping are needed to understand what is being discussed – and who is discussing it.
An economic moat is your company’s ability to maintain a competitive advantage over alternatives. An IR moat is your team’s ability to create highly engaged and loyal long-term investors. Blockchain companies may have insights to share with IROs regarding the characteristics of these sticky relationships with the next generation of investors.
Linda Montgomery is a Toronto-based fintech and digital assets marketing executive and IR professional
This article originally appeared in IR Magazine Spring 2022 issue.
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